Your firm has preferred stock outstanding that pays a current dividend of $3.00 per year and has a current price of $39.50. You anticipate that the economy will grow steadily at a rate of 3.00% per year for the foreseeable future
What is the market required rate of return on your firm's preferred stock?
A) 10.82%
B) 10.59%
C) 7.59%
D) There is not enough information to answer this question.
Answer: C
Explanation: C) Rps = = = 7.59%.
Note: the growth rate in the economy is a red herring and has no bearing on the answer.
Business
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